Climate-fueled insurance crisis hits California

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May 31, 2023 View in browser   By Arianna Skibell A man on a rooftop looks at approaching flames as the 2013 Springs fire grows near Camarillo, Calif. | David McNew/Getty Images From massive wildfires to turbocharged hurricanes, disasters linked to climate change are racking up billions of dollars in damage across large swaths of the country, and insurance companies are struggling to keep up. State Farm, the largest property insurer in California, announced on Friday that it would no longer write new policies for homeowners or businesses in the state due to the high wildfire risk, writes Thomas Frank. The stunning decision is largely due to laws and policies in California that limit the ability of insurance companies to raise rates, industry officials say. Although State Farm has huge financial reserves, the company decided that the increase in wildfires — combined with the inability to increase premiums to profitable levels — was too risky for its shareholders, Tom told Power Switch. Michael Wara, a climate and energy policy expert at Stanford University, told Tom that State Farm’s decision to shrink “in the most valuable real estate market in the country” could threaten the broader economic picture in California, compelling other insurers in the state to take similar action. It’s not just California. Across the country, in states like Louisiana, Colorado, Florida and Texas, property insurance systems are collapsing under the weight of climate change — even without statewide limits on rate increases. “Property insurers have insufficient financial capacity to pay claims,” Tom told Power Switch. “In the Gulf Coast, a dozen insurers have become insolvent in the past year because they couldn't pay all of their claims.” Hotter temperatures are creating drier, highly combustible conditions, fueling an increase in wildfires. And sea-level rise and increased wind and rainfall are fueling more destructive hurricanes and flooding. Compounding the issue is an increase in populations in vulnerable areas like the Atlantic and Gulf coasts and areas in the West where people are building homes in once-pristine forested areas, Tom said. It’s unlikely that a policyholder would be denied a claims payment because their insurer is broke, Tom said. States have developed backup systems to pay claims in the case of emergencies. But costs are increasing, and those systems will continue to be tested as the rate and intensity of climate-fueled disasters grow.   It's Wednesday — thank you for tuning in to POLITICO's Power Switch. I'm your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to askibell@eenews.net.   DON’T MISS POLITICO’S HEALTH CARE SUMMIT: The Covid-19 pandemic helped spur innovation in health care, from the wide adoption of telemedicine, health apps and online pharmacies to mRNA vaccines. But what will the next health care innovations look like? Join POLITICO on Wednesday June 7 for our Health Care Summit to explore how tech and innovation are transforming care and the challenges ahead for access and delivery in the United States. REGISTER NOW.     Listen to today’s POLITICO Energy podcast Today in POLITICO Energy’s podcast: Josh Siegel breaks and Kelsey Tamborrino break down the changes to environmental permitting rules included in the debt limit deal. Power Centers Claudine Hellmuth/POLITICO (illustration); Freepik (stock ticker, money and oil barrels); Joe Raedle/Getty Images (pump jack) Boom or bust? While oil majors saw record profits last year, inflation has also continued to be a major problem, writes Shelby Webb. Rising costs weighed heavily on producers in places like West Texas, dampening their ability and willingness to drill even as demand and prices last year reached a fever pitch. Debt deal backlash The White House and top Democrats are working quickly to sell their allies on their deal with Republicans to raise the nation's debt ceiling, which Congress needs to pass before Monday to avoid the first U.S. default in history, write Emma Dumain and Robin Bravender. But they are facing a major backlash from environmentalists over the decision to green-light a contentious pipeline and speed permits for energy projects. Mining violations The Justice Department is suing the coal empire of West Virginia Gov. Jim Justice for failing to pay more than $5 million in civil penalties assessed by the Department of the Interior, writes Kyle Cheney. The 128-page civil action, filed Tuesday against 13 of the Justice family businesses and Justice’s adult son, comes as the governor, a Republican, launches a Senate bid against Democratic Sen. Joe Manchin. In Other News A Delta Air Lines plane sits at the gate at Cancun International Airport on May 26. | Daniel Slim/Getty Images Keep climbing: Consumers filed a class-action lawsuit against Delta Air Lines, contending the company inaccurately billed itself as the world’s “first carbon-neutral airline.” Impacts: Destructive Nova Scotia wildfires forced thousands of Canadians to flee their homes.   GET READY FOR GLOBAL TECH DAY: Join POLITICO Live as we launch our first Global Tech Day alongside London Tech Week on Thursday, June 15. Register now for continuing updates and to be a part of this momentous and program-packed day! From the blockchain, to AI, and autonomous vehicles, technology is changing how power is exercised around the world, so who will write the rules? REGISTER HERE.     Subscriber Zone A showcase of some of our best subscriber content. The ship UHL Felicity arrives in New Bedford, Mass., carrying wind turbine tower sections, last week. | Josh Reynolds/AP Photo A disagreement between competing unions has brought work on the country's first major offshore wind farm to a halt. Households that experienced energy insecurity in 2020 paid more for energy use than the average home, according to a new analysis from the U.S. Energy Information Administration. The Treasury Department released updated guidance for a program that offers incentives for clean energy manufacturing in communities that have been dependent on coal. That's it for today, folks! Thanks for reading.   Follow us on Twitter Arianna Skibell @ariannaskibell   Follow us

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